PPN on Incorporating Social Objectives into the procurement of steel in the UK

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In this article, we note the recent PPN on the procurement of steel in major projects, together with the press announcement at the beginning of April 2016 which extended the policy beyond central government to include NHS bodies and local authorities.

In this article, we note the recent PPN on the procurement of steel in major projects, together with the press announcement at the beginning of April 2016 which extended the policy beyond central government to include NHS bodies and local authorities. The policies and press statements are set against the backdrop of the problems at the Tata Steel plant in Port Talbot, and are aimed at using procurement policy to help UK steel companies to compete in the market.

The PPN states that the guidance applies to all central government departments, including their executive agencies and non-departmental public bodies (with other contracting authorities in the wider public sector being strongly encouraged to adopt the same approach). Within its scope are infrastructure, construction or other major procurement projects with a significant steel component, where the overall project requirement has a capital value of £10 million or more. The press release in April 2016 then extends the policy to also include non-central government, such as NHS Bodies and local authorities.

The policy aim behind the policy is to use procurement to assist UK steel companies in competing on a level playing field when applying for public procurement opportunities, through the encouragement of a more strategic and transparent approach to the sourcing of steel in major projects. The hope is that this will stimulate greater competition and lead to better value for money, while helping to address the barriers that prevent UK suppliers from competing effectively.

Where contracts for the supply of steel for major projects are awarded predominantly on the basis of price, there has been a tendency for UK steel companies to be undercut by those based in other economies, such as China, where the steel industry is heavily subsidised by the government. The intention is that, by encouraging contracting authorities to engage with the market pre-procurement and to evaluate tenders in a more holistic way, UK steel companies will stand a greater chance of winning public contracts. The guidance suggests that this could legitimately be done, for example, by setting award criteria so as to evaluate cost over the whole life cycle, and to assess “social” considerations such as sustainable sourcing, supply chain management, skills and training development, benefit to the long term unemployed, health and safety and the diversity of the supplier base.

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